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3 Marijuana Stocks to Buy and Hold for the Next 10 Years

Marijuana stocks might not be in favor right now. Much of this could be blamed on investors’ sentiment based on the lack of positive movement toward cannabis reforms in the U.S. But that doesn’t make pot stocks bad investments. Some domestic multi-state operators (MSOs) have strong fundamentals with massive long-term prospects. 

Investors who buy and hold these stocks could benefit generously once the cannabis market booms again. But as with all growth stocks, patience is vital. On average, analysts foresee monstrous upsides for most marijuana stocks. My eyes are on these three.

Image source: Getty Images.

1. Green Thumb Industries

Even in a limited legal market, Illinois-based Green Thumb Industries(OTC: GTBIF) revenue has quadrupled from $216 million in 2019 to $894 million in 2021.

It also has been profitable for seven consecutive quarters in a highly competitive industry, thanks to its aggressive expansion strategies. From operating 39 stores in 2019 to around 80 dispensaries in 15 states today, it has come a long way.

What’s intriguing about this MSO is it targets limited license markets rather than expanding just anywhere. These state market regulators offer limited licenses to select cannabis operators. The strategy has allowed Green Thumb to garner a stronger consumer hold in these states. 

Perhaps these factors helped the company record another outstanding quarter with a 25% year-over-year surge in revenue to $243 million. A net income under generally accepted accounting principles (GAAP) of $29 million also came in higher than $10 million in the year-ago period. It has opened 10 stores so far this year. The first quarter also marked its ninth consecutive quarter of positive cash flow from operations, which came in at $55 million. It also ended the quarter with $175 million in cash. Getting capital is still a challenge for pot companies as marijuana is federally illegal. Thus, cash on hand will allow it to repay its debt and fund future growth strategies.

Street analysts see a potential upside of 232% for Green Thumb’s stock over the next 12 months. For growth investors looking for a top stock to own, this pot stock is a great option. 

2. Planet 13 Holdings

This $283 million market cap company’s unique superstore strategy has put it in the limelight. It owns massive cannabis dispensaries in key locations that give customers a special retail experience.

Planet 13 Holdings(OTC: PLNH.F) popular Las Vegas store is the world’s largest cannabis space. Its huge dispensaries sell a wide array of branded products, including edibles, vapes, and cannabis extracts. However, it is not a high-revenue-generating company yet, mostly because it operates only in Nevada and California for now.

But Planet 13 is slowly expanding to other states. It plans to open another superstore in Chicago, where it won a dispensary license. The company has also signed leases for two Florida dispensaries and has plans to open a third. This unique superstore strategy could take the company to great heights when the cannabis market expands. 

Even with two states, it is managing to grow revenue. In Q1, revenue showed year-over-year growth of 8% to $26 million. It also reported another quarter of operating profits. However, adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) came in lower at $2.6 million in Q1 versus $5.1 million in the prior-year quarter because of macroeconomic pressures in Q1. Planet 13 is not a profitable company but with its business expanding at this rate and revenues growing, sooner than later it could see green in its bottom line. Management stated in the earnings call the company is focused on maintaining its 8% to 12% market share in Nevada. Its upcoming Florida business is also expected to drive growth in 2023.

3. Jushi Holdings

Despite being a small-cap MSO, Jushi Holdings (OTC: JUSHF) is expanding aggressively. It opened its 33rd nationwide retail location in June, which is also its fourth dispensary in Nevada. The state is a popular market for tourists. 

In its first quarter, Jushi’s quarterly revenue of $62 million rose by 48.5% year over year. According to management, increasing the company’s retail footprint from 17 to 29 stores in the quarter drove this growth. Its EBITDA of $1.1 million, however, fell $3 million from the prior-year quarter. It ended the quarter with $76.2 million of cash and cash equivalents.

Street analysts are bullish about Jushi’s stock, foreseeing an upside of close to 286% over the next 12 months. A ramp-up of state legalization could boost Jushi’s growth numbers, generating strong returns for investors this year.

PLNHF PS Ratio data by YCharts

The industry is still nascent, but it’s predicted to grow at a compound annual growth rate (CAGR) of 14% to be worth $70 billion by 2030. 

There is a vast mismatch between the cannabis companies’ stock performance and the underlying business. Overall negative market sentiment toward riskier stocks like cannabis has also pulled down the company’s valuation. This is why all three stocks above are cheap now, trading at price-to-sales ratios between 1 and 2. Stronger earnings numbers or any positive movement toward cannabis reforms in the near future could make them surge. Given that pot stocks have promising potential, growth-oriented investors might be tempted to buy these at a favorable price now and hold them for the long haul.

Sushree Mohanty has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Green Thumb Industries, Jushi Holdings, and Planet 13 Holdings Inc. The Motley Fool has a disclosure policy.

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